The Current19:33Rethinking banks’ investments in fossil fuels
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If banks want to prove they are serious about fighting climate change, it’s going to show by where they put their money, says Matt Price.
“There’s a lot of talk about governance and data and these kinds of stepping stones towards action at some point in time,” Price told Matt Galloway on The Current.
“What we’re not really seeing is the steps and the policies that the banks are going to implement to actually change their practices on a day-to-day basis.”
With Canadian banks leading the way in fossil fuel investment, Price of the shareholder advocacy group Investors for Paris Compliance says if banks aren’t going to make the necessary changes, investors will need to take action themselves.
According to the annual Banking on Climate Chaos report, the Royal Bank of Canada put $42 billion US toward fossil fuel projects in 2022. That makes it the world’s largest investor in fossil fuels, and four other Canadian banks made the list as well.
The report found that last year, Scotiabank invested $29.5 billion US into fossil fuels, Toronto-Dominion invested about $29 billion US, and the Bank of Montreal and CIBC invested $19.3 billion US and $17.9 billion US respectively.
The CBC reached out to the five banks for comment. None agreed to an interview, although Scotiabank and RBC both provided written statements.
“The authors of this report do not validate their figures or findings with us and we can’t confirm their conclusions,” a spokesperson for RBC said in an email.
“This report does not measure progress in meeting our climate goals. We are confident in our ongoing engagement with our clients and our climate strategy.”
The consumer’s choice
Price says that on paper, all the banks mentioned have pledged to reduce financed emissions to zero by 2050. But he says just the promise isn’t enough.
Price’s group put together a report card for the big banks in Canada, showing how they stacked up when it comes to fighting climate change.
He says he understands why banks feel it makes financial sense to continue to invest in fossil fuels, but argues that in the long run, it’s a bad investment.
“There’s a lot of inertia in the system. The banks have made a lot of money off of oil and gas companies and continue to do so. And so you’re fighting that kind of short-term, quarter-to-quarter basis of trying to make profits,” said Price.
Instead, Price points to the long-term risks to both the environment and the economy.
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“We see that in B.C. where I’m from, with highways getting washed out and the entire town of Lytton getting burned down. So these will have economic implications and that will affect the banks,” said Price.
Some advocates say even the targets need to be more ambitious. Warren Mabee, director of the Queen’s Institute for Energy and Environmental Policy in Kingston, Ont., says even the targets need to be more ambitious.
He argues that setting targets decades away in 2050 means that in the short term, there isn’t the same pressure for immediate change.
“Their targets are less stringent, particularly in the short term, working towards 2030. They’re looking for some reductions in greenhouse gas emissions, but not a 100-per-cent drop,” said Mabee.
‘We need to be realistic here’
Not all investors agree on a 100-per-cent drop of fossil fuel investments. Martin Pelletier, an investment advisor based in Calgary, says the capital gained from fossil fuel investments can actually help banks transition out of fossil fuels.
“If you cut off funding, the supply situation will get worse,” said Pelletier. “We need to be realistic here. The world still consumes 100 million barrels a day of oil. That’s not something that can easily go away overnight.”
CBC’s request for an interview with the Canadian Banking Association, a group that lobbies on behalf of Canadian Banks, was declined. It instead defended how banks are handling the transition in an emailed statement.
“Banks acknowledge that firm commitments are required to accelerate clean economic growth in Canada and to meet the goal of a net-zero economy. That’s why banks in Canada have begun implementing climate action plans that set specific targets to meet the demands of this global challenge,” the email said.
“By financing the climate transition, banks are helping Canada meet its net-zero ambitions while also helping meet interim energy demands in a volatile global context.”
And while the big dollars involved seem to grand in scale, Price says there are things Canadians can do to make a difference. Price took his money out of a bank and put it into a credit union, because he didn’t like how his bank was investing.
He says people can also talk with their financial advisors about where their money is going, and if enough people decide to make changes, banks may be influenced to make different decisions.
“I think everybody has a role to play. And especially if you’re concerned about climate change and you’re concerned about long-term returns, then this is a conversation you really need to be having,” said Price.